China’s Economic Growth and Pakistan’s Growth Performance: The Role of Bilateral Trade and Chinese Foreign Direct Investment, 1990–2022

Abstract

China’s economic expansion presents opportunities for Pakistan through trade and investment, but the domestic growth benefits of these linkages remain contested. This study examines the relationship between China’s economic growth, Chinese foreign direct investment, bilateral trade, and Pakistan’s real GDP growth using annual data for 1990–2022. An explanatory sequential mixed-methods approach combines autoregressive distributed lag models and error-correction representations with documentary analysis of bilateral trade agreements and investment policy frameworks.

            The reported estimates indicate a positive association between China’s economic growth and Pakistan’s growth performance, while Chinese foreign direct investment is not statistically significant in the long-run specifications. Bilateral exports are positively associated with Pakistan’s growth, whereas imports exhibit a negative association. In the integrated specification, the reported coefficients are 0.932 for China’s GDP growth, 8.351 for log exports, and −11.649 for log imports. Because Pakistan’s GDP growth enters in levels, the trade coefficients represent changes in the growth rate associated with changes in logged trade flows rather than conventional growth elasticities. The estimated error-correction coefficient of −0.751 indicates substantial annual adjustment towards the estimated equilibrium; however, the integrated model’s inconclusive bounds-test result warrants caution in interpreting its long-run estimates.

            The documentary analysis situates these findings within concerns about market access, domestic production linkages, and technological absorption. The study contributes a historically extended assessment of Pakistan–China economic integration and highlights the importance of

export diversification, domestic supplier development, and skills formation in strengthening its potential growth benefits.